Could An Underbid Win Dow Jones?
The news that Pearson and General Electric are thinking about making a counter-offer for Dow Jones raises the interesting question: Could an underbid succeed?
For most public companies, the answer would be no, particularly when cash is being offered. A board might get away with saying one company’s stock was a better long-term investment than another’s, even though the market disagreed, but it is hard to argue that less of Jeff Immelt’s cash is more attractive than more of Rupert Murdoch’s.
But Dow Jones has an unusal provision in its corporate charter:
“The board of directors of the corporation, when evaluating any actions or transactions described in paragraph a of Article Seventh of this certificate of incorporation, shall give due consideration to all relevant factors, including without limitation the effect of such action or transaction upon the independence and integrity of the corporation’s publications and services and the social and economic effects of such action or transaction upon the corporation’s stockholders, employees, subscribers, readers, advertisers, customers, suppliers and other constituencies, and on the communities in which the corporation and its subsidiaries operate or are located.”
That would seem to allow the board to agree to take less if it thought that would preserve “the independence and integrity” of The Wall Street Journal. The bulk of shareholders would disagree, of course, but if the board voted to approve a deal with Pierson and G.E. in return for, say, $55 a share in cash or stock, and the Bancroft family said it would not take any price from Mr. Murdoch, who has offered $60, public shareholders might go along and the courts might agree.
The Bancrofts control the super-voting shares but cannot sell control of the company, because the shares lose their super-voting privileges if sold. They have been trying to come up with a deal to let Mr. Murdoch buy the company without having real control of the journalism. It is hard to imagine him agreeing to any such proposition that did not have a loophole, so the Bancrofts could yet face a decision on whether to take less, assuming somebody makes an offer, or turn over the Journal to Mr. Murdoch.
